Energy transition demand helps Liberty Project Cargo Consortium exceed plan in 2023

One of the key aims of Lloyd’s sustainability strategy has been to drive an increase in the amount of renewable energy business underwritten through the market.

For Liberty, a central driver towards this goal has been the launch of the Liberty Project Cargo Consortium (LPCC). Unveiled in October 2022, the project has proved a successful vehicle for underwriting renewable business through Lloyd’s.

Speaking to The Insurer TV to mark the consortium’s first full year of operations, Chris Hicks, marine cargo underwriting manager at Liberty Specialty Markets (LSM), revealed how the energy transition has driven business through the consortium.

“Around 50 percent of the GWP that we've written has been for solar, wind, and battery energy storage systems,” Hicks revealed. “The size of the consortium – it has a $205mn limit – means it is perfectly positioned to target renewable energy projects, and it has been a great vehicle for us to really support the energy transition.”

“Globally, we are seeing a huge amount of investment going into new forms of renewable power, and that has driven huge demand for the consortium. It is something we are really proud to be involved with, and keen to facilitate.”

The LPCC was announced in October 2022, with supporting syndicates including Aegis, Antares, Apollo, Axis, Chaucer and Munich Re.

At the time of the consortium’s launch, LSM highlighted the opportunities presented by the recent worldwide surge in large-scale projects prompted by the energy transition, changes to global supply chains, new manufacturing processes and other industrial and civic developments.

Alongside the opportunities provided by the energy transition, Hicks also highlighted how climate change is impacting the risk landscape for cargo insurers through changing weather patterns.

“We are seeing a trend of increased catastrophe activity, as well as changing catastrophe patterns across the world – floods happening in non-flood zones, tornadoes in areas that traditionally weren't tornado hotspots, wildfires becoming more frequent – these are all challenging insurers.”

Changing weather patterns are also disrupting trade routes, such as the Panama Canal.

“We've been grappling with water levels in the Panama Canal. We're starting to see our first shipments when heavy lift cargoes don't want to queue to actually transit the canal. They are having to go much longer routes to reach the destination, which increases the time that you're exposed to the risk,” he said.

Hicks was joined in the discussion by other key players in the LPCC, including Sarah-Jane Friedlos, LSM’s portfolio manager for marine and aviation

“There has been clear demand for this vehicle in the marketplace due to the efficiencies that it provides and the increased number of projects we've seen supporting the energy transition.

“Clients value our proactive approach to risk engineering and, as a result, we've exceeded our plan in year one and believe we have a strong pipeline going into 2024,” she said.

Key to this risk engineering approach has been the addition of Samson Rathaur, the first risk engineer to join LSM’s London marine division.

Rathaur, who holds the title of marine risk manager, said the consortium had benefited from a resurgence in activity following the Covid-19 pandemic.

“During the pandemic, many big projects were put on hold or postponed. Once the market opened, there was a big drive for those projects to come back live. There were a lot of other projects in the pipeline which came online as well,” he said.

“This triggered a spike in demand for raw materials leading to a long-lead time for critical items which has resulted in supply chain impacts as well as the availability of vessels.”

This has led to an increase in risk of project delays – whereas it may have taken nine to 12 months to get a transformer rebuilt prior to the pandemic, this may now take upwards of 18 months, increasing the risk of a project being delayed.

Robert Hawes, technical claims lead at LSM, said these supply chain issues will have an impact on the quantum of overall claims.

“An item that might have cost, say, $500,000 three years ago, is now going to cost $800,000,” he said.

“The LPCC also covers delay in startup of the project itself because of damage to a critical item. The longer the lead time you have, the more likely there is to be a claim impacting that delay-in-start-up consequential loss.”

Watch this 20-minute video to learn more about:

  • How the severity of cargo losses is being pushed up by the size of warehouses
  • Why brokers love the structure of the LPCC
  • How Covid-19 has affected supply chains